WITH history as a guide, Maybank IB Research has gathered that sales of Magnum Bhd and Berjaya Sports Toto Bhd (BST) will recover to circa 80% of pre-COVID-19 levels very soon, thus encouraging both companies to resume paying dividends.
Since number forecast operators (NFOs) were allowed to re-open on Sept 14, the research house understands that most of the circa 1,700 NFO outlets across Malaysia have re-opened.
Thus, it took stock and examine how jackpot sales are faring. Although they account for circa 20% of industry sales, jackpot sales can be reliably estimated draw by draw due to their ‘snowballing’ feature.
“While Classic 4D accounts for circa 75% of industry sales, their sales cannot be reliably estimated draw by draw as there is no ‘snowballing’ feature,” analyst Yin Shao Yang pointed out in a gaming sector review.
Though the number of new COVID-19 cases in Malaysia has fallen sharply of late, Maybank IB Research reckoned that they are still high by historical standards.
Yet, its estimation of jackpot sales post-reopening on Sept 14 (post-FMCO [full movement control order]) is similar to that post-reopening on June 17, 2020 (post-MCO 1.0).
“Recall that post-MCO 1.0, Magnum and BST’s NFO sales (Classic 4D, jackpot and other games) recovered quickly to circa 80% of pre-COVID-19 levels,” observed the research house.
“Thus, we gather that both Magnum and BST’s NFO sales will again recover quickly to circa 80% of pre-COVID levels in 4Q 2021 and beyond.”
Maintaining a “positive” outlook on the gaming sector, Maybank IB Research noted that the earnings per share (EPS) of Magnum and BST could be raised by 35-40% given that NFO outlets were reopened one-and-a-half months earlier than we expected.
“Yet, we left our EPS estimates unchanged lest new COVID-19 cases climb and force NFO outlets to shut again. We conservatively leave our EPS estimates unchanged,” justified the research house.
“In any case, any positive earnings revision for this current financial year (FY) is unlikely to be repeated next FY onwards as we already assume that all NFO outlets will operate on full year basis going forward.”
At 10.30am, Magnum was down 1 sen or 0.48% to RM2.06 with 28,700 shares traded (valuing the company at RM2.96 bil) while BST was up 1 sen or 0.49% to RM2.06 with 106,400 shares traded (valuing the company at RM2.78 bil). – Oct 13, 2021